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HomeMy WebLinkAbout12/08/2016 EDA Special Meetingcity of AppleVlle Y Meeting Location: Municipal Center 7100 147th Street West Apple Valley, Minnesota 55124 December 8, 2016 SPECIAL ECONOMIC DEVELOPMENT AUTHORITY MEETING TENTATIVE AGENDA 6:30 p.m. 1. Call to Order 2. Approve Agenda 3. Approve Consent Agenda Items Consent Agenda Items are considered routine and will be enacted with a single motion, without discussion, unless a commissioner or citizen requests to have any item separately considered. It will then be moved to the regular agenda for consideration. A. Approve Minutes of October 27, 2016 4. Regular Agenda Items A. Adopt Resolution Consenting to Transfer of Parkside Village Gabella from IMH Gabella LLC to Bigos-Gabella, LLC by Consenting to Partial Assignment of Development Agreements and Consenting to Assignment of the Tax Increment Revenue Note 5. Adjourn Regular meetings are broadcast, live, on Charter Communications Cable Channel 180 and on the City's website at www.cityofapplevalley.org ECONOMIC DEVELOPMENT AUTHORITY City of Apple Valley Dakota County, Minnesota October 27, 2016 Minutes of the special meeting of the Economic Development Authority of Apple Valley, Dakota County, Minnesota, held October 27, 2016, at 6:00 p.m., at Apple Valley Municipal Center. PRESENT: Commissioners Bergman, Goodwin, Grendahl, Hamann -Roland, Hooppaw and Melander ABSENT: Commissioner Maguire City staff members present were: Executive Director Tom Lawell, Attorney Michael Dougherty, Community Development Director Bruce Nordquist, Finance Director Ron Hedberg, Planner Kathy Bodmer, Planner/Economic Development Specialist Alex Sharpe, and Department Assistant Joan Murphy Meeting was called to order at 6:01 p.m. by President Goodwin. APPROVAL OF AGENDA MOTION: of Hamann -Roland, seconded by Grendahl, approving the agenda. Ayes - 6 - Nays - 0. CONSENT AGENDA MOTION: of Hooppaw, seconded by Bergman, approving the minutes of the meeting of September 22, 2016, as written. Ayes - 6 - Nays - 0. MOTION: of Hooppaw, seconded by Bergman, adopting Resolution No. EDA 2016-09 certifying the benefit date for the Business Subsidy Agreement with Uponor, Inc. and authorizing the execution of Exhibit B to the Business Subsidy Agreement. Ayes - 6 - Nays - 0. PARKSIDE VILLAGE GALANTE Planner Kathy Bodmer stated IMH Special Asset NT 175 -AVN, LLC received authorization to construct the Parkside Village development on January 24, 2013. The project included two sites, the 196 -unit Parkside Village Gabella building north of Kelley Park and the 126 -unit Parkside Village Galante building west of Kelley Park. Construction of the Parkside Village Gabella building was completed with the final certificate of occupancy issued on May 31, 2016. Bigos Management executed a purchase agreement with IMH to purchase the Galante property on the southeast corner of Galaxie Avenue and 152nd Street. In connection with the purchase, Bigos Management submitted an application requesting tax increment financing assistance to construct the Parkside Village Galante building as previously approved by the City. The City's Financial Consultant, Northland Securities, conducted a review of the Bigos Management company and determined, based on information provided, that Bigos has the experience and capacity to complete Economic Development Authority City of Apple Valley Dakota County, Minnesota October 27, 2016 Page 2 the project. The consultant analyzed the pro forma for the project and determined the Galante development may not occur with only private investment. The overall development of the Galante building will be consistent with the previously approved plans. The building footprint, parking lot and access points all remain the same. Bigos-Galante plans to make minor modifications to the units, removing the three bedroom units to reflect market demand. As a result, the number of units will increase from 126 to 134. An exterior pool is added to provide an additional amenity for the residents. Other than these minor changes, the building remains the same as approved January 2013. The revised building permit plans are scheduled to be reviewed by the City Council at its November 10, 2016, meeting. The Parkside Village development is subject to an approved Development Assistance Agreement and Business Subsidy Agreement which requires the Apple Valley Economic Development Authority (EDA) and City Council to review and consent to transfers of ownership and assignment of documents. Tammy Omdal, Northland Securities, provided additional information. Discussion followed. MOTION: of Hamann -Roland, seconded by Melander, adopting Resolution No. EDA 2016-10 Consenting to Partial Assignment of Development Agreements to Bigos-Galante LLC. Ayes - 6 - Nays - 0. MOTION: of Hamann -Roland, seconded by Hooppaw, adopting Resolution No. EDA 2016-11 approving Second Amendment to Amended and Restated Development Assistance Agreement. Ayes - 6 - Nays - 0. ADJOURNMENT MOTION: of Hooppaw, seconded by Grendahl, to adjourn. Ayes - 6 - Nays - 0. The meeting was adjourned at 6:26 p.m. Respectfully Submitted, Murphy, DepartQent Asitant Approved by the Apple Valley Economic Development Authority on Tom Goodwin, President 00* city of Apple Valley ITEM: EDA MEETING DATE: SECTION: December 8, 2016 Regular PROJECT NAME: Partial Assignment of Documents and Tax Increment Revenue Note from IMH Gabella LLC to Bigos-Gabella, LLC for Parkside Village Gabella. PROJECT DESCRIPTION Consider partial assignment of documents and tax increment revenue note from IMH Gabella LLC to Bigos-Gabella, LLC to facilitate the transfer of the property from IMH Gabella LLC to Bigos- Gabella, LLC. STAFF CONTACT: Kathy Bodmer, Planner DEPARTMENT/DIVISION: Community Development Department APPLICANT: IMH Gabella LLC and Bigos-Gabella, LLC PROJECT NUMBER: PC 16-45-M APPLICATION DATE: Proposed Action Adopt Resolution Consenting to Transfer of Parkside Village Gabella from IMH Gabella LLC to Bigos-Gabella, LLC by Consenting to Partial Assignment of Development Agreements and Assignment of Tax Increment Revenue Note. Project Summary/Issues IMH Special Asset NT 175 -AVN, LLC received authorization to construct the Parkside Village development on January 24, 2013. The project included two sites, the 198 -unit Parkside Village Gabella building north of Kelley Park and the 128 -unit Parkside Village Galante building west of Kelley Park. Construction of the Parkside Village Gabella building was completed with the final certificate of occupancy issued on May 31, 2016. Bigos Management executed a purchase agreement with IMH to purchase the 198 -unit Gabella apartment building north of Kelley Park at 6820 Gabella Street. In connection with the purchase, Bigos Management submitted an application requesting tax increment financing assistance to own and operate the Parkside Village Gabella building as previously approved by the City. The City's Financial Consultant, Northland Securities, conducted a review of the project financing. Mr. Bigos has applied for Fannie Mae financing and because of this financial standing, is considered to be a premium borrower. As such, Mr. Bigos is expected to have no issues in qualifying for the financing. The acquisition will be comprised of $30.4 million Fannie Mae financing and $8.1 million of equity. The Parkside Village development is subject to an approved Development Assistance Agreement and Business Subsidy Agreement which requires the Apple Valley Economic Development Authority (EDA) and City Council to review and consent to transfers of ownership, assignment of documents and mortgages. The attached resolution accomplishes the following: 1. Consents to the transfer of ownership of the "Gabella" property to Bigos-Gabella, LLC and partially assigns the approved development agreements to Bigos. The partial assignment will require Bigos to perform all of obligations of the agreements previously executed by the City, EDA and owners as they relate to the Galante property, including: • Phase I Assessment Agreement • Amended and Restated Development Assistance Agreement and all subsequent amendments. • Planned Development Agreement • Development Agreement • Business Subsidy Agreement • Private Installation Agreement 2. Consents to the assignment of the TIF Revenue Note from IMH Gabella LLC to Bigos- Gabella, LLC. Background At its October 17, 2012, meeting, the Apple Valley Planning Commission voted unanimously to recommend approval of the Parkside Village project with conditions. Subsequently, the City Council reviewed and approved the Parkside Village project with conditions on January 24, 2013. On July 10, 2014, the City Council approved splitting the project into two phases which allowed the developer to move forward with the construction of the Parkside Village Gabella building. Construction of the Parkside Village Gabella was completed in 2016 with the Certificate of Occupancy issued on May 31, 2016. Budget Impact Tax Increment Financing assistance was requested and approved for this development. Attachment(s) 1. Northland Securities Memo 2. Resolution Consenting to Assignments 3. Partial Assignment of Development Agreements 4. Assignment of Tax Increment Revenue Note 5. Location Map NORTHLAND SECUInES MEMORANDUM To: City of Apple Valley From: Tammy Omdal Date: November 30, 2016 Re: Transfer of the Gabella at Parkside to Bigos Management The City of Apple Valley (the "City") received a request from IIVIH Gabella, LLC for the City and the Apple Valley Economic Development Authority (the "EDA") to approve the transfer and assignments of agreements for Gabella at Parkside (the "Project") to Bigos Management (the "Buyer"). This memorandum provides information on the Buyer and the proposed financing of the acquisition. Background on Bigos Bigos is a real estate development and property management company working in the rental marketplace in the Twin Cities. Within Bigos portfolio is 45 apartment buildings in Minnesota totaling over 8,000 units. The most recent projects completed by Bigos include: • Kellogg Square Apartments, St. Paul, MN Class A apartment with 472 units. Taxable market value of $45 million. There is no debt on the property. ▪ Calhoun Greenway, Minneapolis, MN. Class B apartment with 354 units. Taxable market value of $32 million. There is no debt on the property. • Be at Calhoun, Minneapolis, MN. Class A apartment with 185 units. Taxable market value of $33 million. There is no debt on the property. Bigos has the capacity to undertake the financing and the management of the Project. Financing Arrangement Bigos provided to Northland a pro forma for the Project and a letter from Marcus and Millichap regarding the proposed financing of the purchase of Gabella at Parkside. Marcus and Millichap is representing both buyer (Bigos) and seller (IMH) on the sale. The capital markets group at Marcus and Millichap is assisting Mr. Ted Bigos, the owner of Bigos, with acquiring financing for the project. Mr. Bigos has applied for Fannie Mae financing. It has been represented to Northland that due to Mr. Bigos extensive portfolio, and financial standing, he is considered a premium borrower by Fannie Mae. Fannie Mae is reported to have no issues with Mr. Bigos financial abilities to qualify for this financing. Bigos will acquire the Project from IME for an approximate $38.5 million. The acquisition will include financing from Fannie Mae estimated at $30.4 million and approximately $8.1 million of equity. The proposed financing arrangement does not anticipate any up -front cash from the Tax Increment Financing Note (the "TIF Note"). Bigos will hold the assigned TIF Note and collect the semi-annual payments as revenue from the Project. The EDA originally issued the TIF Note to IMH in the par amount of $2,684,000, dated September 22, 2016. 45 South 7th Street, Suite 2000, Minneapolis, MN 55402 Main: (612) 851-5900 / Direct: (612) 851-4964 / Email: tomdal@northlandsecurities.com Member FINRA and SIPC APPLE VALLEY ECONOMIC DEVELOPMENT AUTHORITY RESOLUTION NO. EDA -16 - HELD: December 8, 2016 RESOLUTION CONSENTING TO PARTIAL ASSIGNMENT OF DEVELOPMENT AGREEMENTS AND ASSIGNMENT OF TAX INCREMENT REVENUE NOTE BE IT RESOLVED by the Board of Commissioners (the "Board") of the Apple Valley Economic Development Authority (the "Authority"), as follows: 1. Recitals: (a) The Authority, the City of Apple Valley, Minnesota (the "City"), and IMH Special Asset NT 175 -AVN, LLC, an Arizona limited liability company (the "Developer") have entered into a Development Assistance Agreement, dated as of February 1, 2013 ("Original Agreement"), in connection with the construction of an approximately 322 unit multifamily rental housing facility consisting of two buildings, by the Developer and each building being located in the City, one of which is known as Parkside Village Gabella ("Parkside Village Gabella"). (b) The Authority, the City and the Developer amended and restated the Original Agreement in its entirety and entered into an Amended and Restated Development Assistance Agreement, as amended by a First Amendment to Amended and Restated Development Assistance Agreement, dated as of October 9, 2014, affected by that certain Partial Assignment of Development Agreements, dated October 9, 2014 by and between the Developer and the Authority to IMH Gabella, LLC, as Assignee ("IMH"), as further amended by that certain Second Amendment to Amended and Restated Development Assistance Agreement, dated on or about November 14, 2016, affected by that certain Partial Assignment of Development Agreements by IMH to Bigos-Galante, LLC (collectively, the "Development Assistance Agreement"). (c) IMH proposes to enter into a Partial Assignment of Development Agreements (the "Partial Assignment") with Bigos-Gabella, LLC, and has requested the Authority's consent to the assignment of the agreements set forth on Exhibit B of the Partial Assignment. (d) Under the terms of the Development Assistance Agreement, a Tax Increment Revenue Note (Gabella Project), No. R-1, dated September 22, 2016 was issued to IMH (the "TIF Note") by the Authority and which IMH proposes to assign to Bigos-Gabella, LLC, pursuant to that certain Assignment of Tax Increment Revenue Note (Gaballa Project) (the "Assignment") for which the Authority's consent is requested. (e) WHEREAS, the Board finds that it is in the best interest of the City and its residents that the Authority consent to the Partial Assignment and the Assignment. 8082664v1 2. Consent; Execution. The Board hereby approves and consents to the Partial Assignment and the Assignment in substantially the forms submitted, and the President and Secretary of the Board are hereby authorized and directed to execute such consents on behalf of the Authority. The approval hereby given includes approval of such additional details therein as may be necessary and appropriate and such modifications thereof, deletions therefrom and additions thereto as may be necessary and appropriate and approved by the Authority officials authorized by this resolution to execute the same. The execution of the documents referred to herein by the appropriate officer or officers of the Authority shall be conclusive evidence of its consent thereto. Adopted by the Board of Commissioners of the Apple Valley Economic Development Authority, Minnesota, this 8th day of December, 2016. ATTEST: Pamela J. Gackstetter, Secretary 2 8082664v1 Tom Goodwin, President Member introduced the foregoing resolution and moved its adoption. The motion for the adoption of the foregoing resolution was duly seconded by Member , and upon vote being taken thereon, the following voted in favor: and the following voted against the same: whereupon said resolution was declared duly adopted. 3 8082664v 1 STATE OF MINNESOTA ) ss. COUNTY OF DAKOTA ) I, the undersigned, being the duly qualified and acting Secretary of the Apple Valley Economic Development Authority, DO HEREBY CERTIFY that the attached resolutions is a true and correct copy of an extract of minutes of a meeting of the Board of Commissioners of the Apple Valley Economic Development Authority duly called and held, as such minutes relate to a Resolution Consenting to Partial Assignment of Development Agreements and Assignment of Tax Increment Revenue Note (Gabella Project). WITNESS my hand as such Secretary of the Apple Valley Economic Development Authority this day of December, 2016. Secretary 8082664v1 PARTIAL ASSIGNMENT OF DEVELOPMENT AGREEMENTS PARTIAL ASSIGNMENT OF DEVELOPMENT AGREEMENTS THIS PARTIAL ASSIGNMENT OF DEVELOPMENT AGREEMENTS (this "Agreement") is made and entered into as of the day of December, 2016 (the "Effective Date"), by and between IMH GABELLA, LLC, a Delaware limited liability company ("Assignor"), and B1GOS-GABELLA, LLC, Minnesota limited liability company ("Assignee"). RECITALS Assignor has, of even date herewith, conveyed to Assignee, the real property located in Apple Valley, Dakota County, Minnesota, legally described on Exhibit A attached hereto and made a part hereof (the "Property"). The Property is burdened and benefited by those certain development agreements and other governmental incentive agreements listed and described on Exhibit B attached hereto and made a part hereof (collectively, the "Development Agreements"). Assignor desires to assign to Assignee solely that portion of Assignor's right, title and interest in, to and under the Development Agreements relating to the Property and Assignee desires to accept such assignment and assumes and agrees to perform all of such obligations of Assignor under the Development Agreements relating to the Property arising from and after the Effective Date, in accordance with its terms. NOW THEREFORE, in consideration of One Dollar ($1.00) and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Assignor and Assignee hereby agree as follows: 1.) Recitals. The foregoing recitals are correct and are incorporated herein. 2.) Assignment. Assignor hereby transfers, assigns and conveys to Assignee that portion of Assignor's right, title and interest in, to and under the Development Agreements relating to the Property (the "Property Rights"). 3.) Acceptance. Assignee hereby accepts the assignment of the Property Rights and hereby assumes all of the rights, obligations and liabilities of Assignor with regard to the Property Rights arising from and after the Effective Date and agrees, for the benefit of Assignor, to perform, observe, keep and comply with all of the terms, covenants, conditions, provisions and agreements concerning the Property Rights on the part of Assignor thereunder to be performed, observed, kept and complied with from and after the Effective Date. 4.) Counterparts. This Agreement may be executed simultaneously in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Facsimile or email (PDF format) signatures shall be deemed and treated as originals. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the date first written above. ASSIGNOR: IMH GABELLA, LLC, a Delaware limited liability company By: Southwest Acquisitions, LLC, a Delaware limited liability company Its: Sole Member By: IMH Special Asset NT 175 -AVN, LLC, an Arizona limited liability company Its: Manager and Class A Member By: IMH Financial Corporation, a Delaware corporation Its: Sole Member By: Name: Its: ACKNOWLEDGEMENT STATE OF ARIZONA ) )SS COUNTY OF MARICOPA ) The foregoing instrument was acknowledged before me this day of , 20 , by , the ,of IMH Financial Corporation, a Delaware corporation, the Sole Member of IMH Special Asset NT 175 -AVN, LLC, an Arizona limited liability company, the Manager and Class A Member of Southwest Acquisitions, LLC, a Delaware limited liability company, the Sole Member of IMH Gabella, LLC, a Delaware limited liability company. Signature (Space above for official notarial seal) ASSIGNEE: BIGOS-GABELLA, LLC, a Minnesota limited liability company By: Name: Theodore J. Bigos Its: Chief Manager ACKNOWLEDGEMENT STATE OF ) SS COUNTY OF The foregoing instrument was acknowledged before me this day of , 20 , by Theodore J. Bigos, the Chief Manager of Bigos-Gabella, LLC, a Minnesota limited liability company. Signature (Space above for official notarial seal) EXHIBIT A Legal Description of the Property: Lot 1, Block 1, Parkside Village Gabella. Dakota County, Minnesota Abstract Property EXHIBIT B List of Development Agreements: 1. Phase 1 Assessment Agreement dated July 10, 2014, by and between the City of Apple Valley, a municipal corporation organized and existing under the laws of the State of Minnesota (the "City"), and IMH Special Asset NT 175 -AVN, LLC, an Arizona limited liability company ("175 -AVN"), recorded September 25, 2014, as Document No. 3031136 in the Office of the Dakota County Recorder (the "Official Records"), as affected by the Certification by County Assessor recorded October 6, 2014 as Document No. 3032913 in the Official Records, as affected by that certain Partial Assignment of Development Agreement by and between 175 -AVN, as assignor, and Assignor, as assignee, dated as of October 9, 2014, and recorded on October 22, 2014, as Document No. 3035344. 2. Amended and Restated Development Assistance Agreement, by and among the Apple Valley Economic Development Authority, a political subdivision organized under the laws of the State of Minnesota (the "Authority"), the City, and 175 -AVN, dated July 10, 2014, and recorded on September 25, 2014, as Document No. 3031137 in the Official Records, as previously amended by that certain First Amendment to Amended and Restated Development Assistance Agreement, dated effective as of October 9, 2014, and recorded on October 21, 2014, as Document No. 3035036 in the Official Records, as affected by those certain Partial Assignments of Development Agreements by and between 175 -AVN, as assignor, and Assignor, as assignee, dated as of October 9, 2014, and recorded on October 22, 2014, as Document Nos. 3035344 and 3035345 in the Official Records, as amended by that certain Second Amendment to Amended and Restated Development Assistance Agreement recorded on November [ ], 2016 as Document No. 3162172 in the Official Records [and re-recorded on 2016 as Document No. in the Official Records], and as affected by that certain Partial Assignment of Development Agreements by and between Assignor and Bigos-Galante, LLC, a Minnesota limited liability company ("Bigos-Galante"), dated as of [ ], 2016, and recorded on [ ], 2016 as Document No. 3162174 in the Official Records [and re-recorded on , 2016 as Document No. in the Official Records (collectively, the "Development Assistance Agreement"). 3. Planned Development Agreement by and between 175 -AVN and the City dated July 10, 2014 and recorded on September 25, 2014 as Document No. 3031140, as affected by that certain Partial Assignment of Development Agreements by and between 175 -AVN, as assignor, and Assignor, as assignee, dated as of October 9, 2014, and recorded on October 22, 2014, as Document No. 3035344 in the Official Records. 4. Development Agreement dated July 10, 2014, by and between the City and 175 -AVN, filed September 26, 2014, as Document No. 3031142 in the Official Records, as affected by that certain Partial Assignment of Development Agreements dated October 9, 2014, by and between 175 -AVN and Assignor, filed October 22, 2014, as Document No. 3035344 in the Official Records. 5. Business Subsidy Agreement dated July 10, 2014 by and between 175 -AVN and the Authority, as affected by that certain Partial Assignment of Development Agreements by and between 175 -AVN, as assignor, and Assignor, as assignee, dated as of October 9, 2014, and recorded on October 22, 2014, as Document No. 3035344 in the Official Records, and as further affected by that certain Partial Assignment of Development Agreements by and between Assignor and Bigos-Galante, dated as of 2016, and recorded on , 2016 as Document No. 3162174 in the Official Records. 6. Agreement for Private Installation of Improvements dated January 24, 2013, by and between the City and 175 -AVN, as amended by the Amendment to Agreement for Private Installation of Improvements dated July 10, 2014, as affected by that certain Partial Assignment of Development Agreements dated October 9, 2014, by and between 175 -AVN and Assignor, filed October 22, 2014, as Document No. 3035344 in the Official Records. THIS INSTRUMENT WAS DRAFTED BY: IMH Financial Corporation 7001 N. Scottsdale Rd., Suite 2050 Scottsdale, Arizona 85253 Attention: Legal Department Email: leal'apirnhfc.com Phone: (480) 840-8400 CONSENT OF THE AUTHORITY Pursuant to Sections 8.2 and 10.9 of the Development Assistance Agreement and Section 2.8 of the Business Subsidy Agreement by and between Assignor and the Apple Valley Economic Development Authority, Minnesota dated July 10, 2014, the Apple Valley Economic Development Authority, Minnesota hereby consents to: (i) the conveyance of the Property to Assignee; (ii) the foregoing Partial Assignment of Development Agreements; and (iii) the assignment by Assignor to Assignee of all right, title and interest of Assignor in and to the Property Rights. APPLE VALLEY ECONOMIC DEVELOPMENT AUTHORITY, MINNESOTA By: Tom Goodwin, President By: Pamela J. Gackstetter, Secretary STATE OF MINNESOTA ) ) ss. COUNTY OF DAKOTA ) The foregoing instrument was acknowledged before me this day of ,20 ,by and the President and Secretary, respectively, of the Apple Valley Economic Development Authority, Minnesota. Notary Public CONSENT OF THE CITY Pursuant to Sections 8.2 and 10.9 of the Development Assistance Agreement and Section 2.8 of the Business Subsidy Agreement by and between Assignor and the Apple Valley Economic Development Authority, Minnesota dated July 10, 2014, the City of Apple Valley, Minnesota hereby consents to: (i) the conveyance of the Property to Assignee; (ii) the foregoing Partial Assignment of Development Agreements; and (iii) the assignment by Assignor to Assignee of all right, title and interest of Assignor in and to the Property Rights. CITY OF APPLE VALLEY, MINNESOTA By: Mary Hamann -Roland, Mayor By: Pamela J. Gackstetter, City Clerk STATE OF MINNESOTA ) ) ss. COUNTY OF DAKOTA ) The foregoing instrument was acknowledged before me this day of , 20 , by and the Mayor and City Clerk, respectively, of the City of Apple Valley, Minnesota. Notary Public ASSIGNMENT OF TAX INCREMENT REVENUE NOTE (GABELLA PROJECT) ASSIGNMENT OF TAX INCREMENT REVENUE NOTE (GABELLA PROJECT) THIS ASSIGNMENT OF TAX INCREMENT REVENUE NOTE (this "Assignment") is made and entered into as of the day of December, 2016 (the "Effective Date"), by and between IMH GABELLA, LLC, a Delaware limited liability company ("Assignor"), and BIGOS-GABELLA, LLC, a Minnesota limited liability company ("Assignee"). RECITALS A. Pursuant to the terms of that certain Real Property Purchase Agreement and Escrow Instructions dated as of October 21, 2016 (as the same may be or have been amended, restated, extended, renewed, supplemented or otherwise modified from time to time, the "PSA"), by and between Assignor and Assignee, Assignor has, of even date herewith, conveyed to Assignee, the real property located in Apple Valley, Dakota County, Minnesota, legally described on Exhibit A attached hereto and made a part hereof (the "Property"). B. Also pursuant to the terms of the PSA, Assignor has, of even date herewith, conveyed to Assignee the rights and obligations of the "Developer" under that certain Amended and Restated Development Assistance Agreement dated as of July 10, 2014, by and among the Apple Valley Economic Development Authority, a political subdivision organized under the laws of the State of Minnesota (the "Authority") and the City of Apple Valley, Minnesota, a municipal corporation organized and existing under the laws of the State of Minnesota, on the one hand, and IMH Special Asset NT 175 -AVN, LLC, an Arizona limited liability company ("175 -AVN"), on the other hand, recorded September 25, 2014 as Document No. 3031137 in the Office of Dakota County Recorder, as amended by that certain First Amendment to Amended and Restated Development Assistance Agreement dated as of October 9, 2014, and recorded October 21, 2014 as Document No. 3035036 in the Office of Dakota County Recorder, as affected by that certain Partial Assignment of Development Agreements, dated October 9, 2014, by 175 -AVN, as assignor, to Assignor, as assignee, recorded October 22, 2014 as Document No. 3035344 in the Office of Dakota County Recorder, as amended by that certain Second Amendment to Amended and Restated Development Assistance Agreement dated November 14, 2016, and recorded November 14, 2016 as Document No. 3162172 in the office of Dakota County Recorder, and as affected by that certain Partial Assignment of Development Agreements, by Assignor, as assignor, to Bigos-Galante, LLC, a Minnesota limited liability company, as assignee, recorded November 14, 2016 as Document No. 3162174 in the Office of Dakota County Recorder (collectively, and as the same may be further amended, the "Development Assistance Agreement"), solely with respect to the "Phase 1 Development Property" and construction of the "Phase 1 Minimum Improvements", as those terms are defined in the Development Assistance Agreement, including, but not limited to, the right to receive reimbursement from the Authority pursuant to that certain Tax Increment Revenue Note (GabeIla Project), No. R-1, in an amount not to exceed $2,684,000, certified to Assignor as set forth in Exhibit B attached hereto and made a part hereof (the "TIF Note"). C. Assignor desires to assign to Assignee all of Assignor's right, title and interest in, to and under the TIF Note and Assignee desires to accept such assignment, all in accordance with the terms of this Assignment. ASSIGNMENT NOW THEREFORE, for value received, Assignor hereby assigns and transfers all of the Assignor's right, title and interest in and to the TIF Note to Assignee without recourse or any warranty (except as expressly set forth in the PSA). ASSIGNOR: IMH GABELLA, LLC, a Delaware limited liability company By: Southwest Acquisitions, LLC, a Delaware limited liability company Its: Sole Member By: IMH Special Asset NT 175 -AVN, LLC, an Arizona limited liability company Its: Manager and Class A Member By: IMH Financial Corporation, a Delaware corporation Its: Sole Member By: Name: Its: ACKNOWLEDGEMENT STATE OF ARIZONA ) SS COUNTY OF MARICOPA ) The foregoing instrument was acknowledged before me this day of ,20 ,by ,the ,of IMH Financial Corporation, a Delaware corporation, the Sole Member of IMH Special Asset NT 175 -AVN, LLC, an Arizona limited liability company, the Manager and Class A Member of Southwest Acquisitions, LLC, a Delaware limited liability company, the Sole Member of IMH Gabella, LLC, a Delaware limited liability company. Signature (Space above for official notarial seal) ASSIGNEE: Assignee hereby accepts the TIF Note subject to the terms and conditions set forth in the TIF Note and agrees to surrender the TIF Note with the Authority either in exchange for a new fully registered note or for transfer of the TIF Note on the registration records for the TIF Note maintained by the Authority. BIGOS-GABELLA, LLC, a Minnesota limited liability company By: Name: Theodore J. Bigos Its: Chief Manager ACKNOWLEDGEMENT STATE OF ) SS COUNTY OF The foregoing instrument was acknowledged before me this day of , 20 , by Theodore J. Bigos, the Chief Manager of Bigos-Gabella, LLC, a Minnesota limited liability company. Signature (Space above for official notarial seal) EXHIBIT A Legal Description of the Property: Lot 1, Block 1, Parkside Village Gabella. Dakota County, Minnesota Abstract Property EXHIBIT B TIF NOTE (see attached) No. R-1 EXHIBIT B UNITED STATES OF AMERICA STATE OF MINNESOTA COUNTY OF DAKOTA APPLE VALLEY ECONOMIC DEVELOPMENT AUTHORITY TAX INCREMENT REVENUE NOTE (GABELLA PROJECT) 2,684,000 The Apple Valley Economic Development Authority, Minnesota (the "Authority"), hereby acknowledges itself to be indebted and, for value received, hereby promises to pay the amounts hereinafter described (the "Payment Amounts") to IMH Gabelia, LLC, a Delaware limited liability company, or its registered assigns (the "Registered Owner"), but only in the manner, at the times, from the sources of revenue, and to the extent hereinafter provided. The principal amount of this Note shall equal from time to time the principal amount stated above, as reduced to the extent that such principal installments shall have been paid in whole or in part pursuant to the terms hereof; provided that the sum of the principal amount listed above shall in no event exceed $2,684,000 as provided in that certain Amended and Restated Development Assistance Agreement, dated as of July 10, 2014, as amended by a First Amendment to Amended and Restated Development Assistance Agreement dated as of October 9, 2014 (together, the "Development Assistance Agreement"), by and between the Authority, the City of Apple Valley, Minnesota, and IMH Special Asset NT 175 -AVN, LLC, an Arizona limited liability company ("IMH Special Asset, LLC"), and assigned to the Registered Owner by IMH Special Asset, LLC, pursuant to a Partial Assignment of Development Agreements dated October 9, 2014 (the "Assignment"). The unpaid principal amount of the Note shall bear simple, non -compounding interest from the date of issuance of the Note at 5.0% per annum. Interest shall be computed on the basis of a 360 day year consisting of twelve (12) 30 -day months. The amounts due under this Note shall be payable on August 1, 2017, and on each August 1 and February 1 thereafter to and including February 1, 2042 (as determined in accordance with the Development Assistance Agreement), or, if the first should not be a Business Day (as defined in the Development Assistance Agreement) the next succeeding Business Day (the "Payment Dates"). On each Payment Date the Authority shall pay by check or draft mailed to the person whom was the Registered Owner of this Note at the close of the last business day preceding such Payment Date an amount equal to the sum of the Tax Increments (hereinafter defined) received by the Authority during the six month period preceding such Payment Date. All payments made by the Authority under this Note shall first be applied to accrued interest and then to principal. The Payment Amounts due hereon shall be payable solely from 70% of the tax increments (the "Tax Increments") from the Phase 1 Development Property and the Phase 1 Minimum Improvements (as defined in the Development Assistance Agreement) within the Authority's Tax Increment Financing District Tax Increment Financing District No. 15 (the "Tax 7914880v1 Increment District") within its Master Development District which are paid to the Authority and which the Authority is entitled to retain pursuant to the provisions of Minnesota Statutes, Sections 469.174 through 469.1794, as the same may be amended or supplemented from time to time (the "Tax Increment Act"). This Note shall terminate and be of no further force and effect following: (i) the last Payment Date defined above, (ii) on any date upon which the Authority shall have terminated the Development Assistance Agreement under Section 9.2(3) thereof; (iii) on the date the Tax Increment District is terminated; or (iv) on the date that all principal and interest payable hereunder shall have been paid in full, whichever occurs earliest. The Authority makes no representation or covenant, expressed or implied, that the Tax Increments will be sufficient to pay, in whole or in part, the amounts which are or may become due and payable hereunder. The Authority's payment obligations hereunder shall be further conditioned on the fact that no Event of Default under the Development Assistance Agreement shall have occurred and be continuing at the time payment is due hereunder, but subject to the terms and conditions under the Development Assistance Agreement such unpaid amounts may become payable, without interest accruing thereon in the meantime, if said Event of Default shall thereafter have been timely cured; and, further, if pursuant to the occurrence of an Event of Default under the Development Assistance Agreement the Authority elects to cancel and rescind the Development Assistance Agreement, the Authority shall have no further debt or obligation under this Note whatsoever. Reference is hereby made to all of the provisions of the Development Assistance Agreement, and said provisions are hereby incorporated into this Note as though set out in full herein. This Note is a special, limited revenue obligation and not a general obligation of the Authority and is payable by the Authority only from the sources and subject to the qualifications stated or referenced herein. This Note is not a general obligation of the Authority and neither the full faith and credit nor the taxing powers of the Authority are pledged to the payment of the principal of this Note and no property or other asset of the Authority, save and except the above - referenced Tax Increments, is or shall be a source of payment of the Authority's obligations hereunder. This Note is issued by the Authority in aid of financing a project pursuant to and in full conformity with the Constitution and laws of the State of Minnesota, including the Tax Increment Act. This Note may be assigned only with the consent of the Authority which consents shall not be unreasonably withheld. In order to assign the Note, the assignee shall surrender the same to the Authority either in exchange for a new fully registered note or for transfer of this Note on the registration records for the Note maintained by the Authority. Each permitted assignee shall take this Note subject to the foregoing conditions and subject to all provisions stated or referenced herein. IT IS HEREBY CERTIFIED AND RECITED that all acts, conditions, and things required by the Constitution and laws of the State of Minnesota to be done, to have happened, and to be performed precedent to and in the issuance of this Note have been done, have 7914880x1 happened, and have been performed in regular and due form, time, and manner as required by law; and that this Note, together with all other indebtedness of the Authority outstanding on the date hereof and on the date of its actual issuance and delivery, does not cause the indebtedness of the Authority to exceed any constitutional, statutory or charter limitation thereon. IN WITNESS WHEREOF, Apple Valley Economic Development Authority, Minnesota, by its Board of Commissioners, has caused this Note to be executed by the manual signatures of its President and Secretary and has caused this Note to be dated as of September 22, 2016. Tom Goodwin, President 3 7914880v1 Nyulle0, cLda-tctb— Pamela J. kst etter, Secretary CERTIFICATION OF REGISTRATION It is hereby certified that the foregoing Note, as originally issued on September 22, 2016. was on said date registered in the name of IMH GabeIla, LLC, and that. at the request of the Registered Owner of this Note, the undersigned has this day registered the Note in the name of such Registered Owner, as indicated in the registration blank below, on the books kept by the undersigned for such purposes. NAME AND ADDRESS OF DATE OF SIGNATURE OF REGISTERED OWNERS REGISTRATION EDA SECRETARY IMH Gabella, LLC 7001 N. Scottsdale Road, #2050 Scottsdale, AZ 85253 7914880v1 September 22, 2016 , 20 , 20 4 , 20 THIS INSTRUMENT WAS DRAFTED BY: IMH Financial Corporation 7001 N. Scottsdale Rd., Suite 2050 Scottsdale, Arizona 85253 Attention: Legal Department Email: leE,,.alf,q,imhfc.com Phone: (480) 840-8400 CONSENT OF THE AUTHORITY Pursuant to Section 10.9 of the Development Assistance Agreement and the terms set forth on page 2 of the TIF Note regarding assigning the TIF Note, the Apple Valley Economic Development Authority, Minnesota hereby consents to: (i) the conveyance of the Property to Assignee; (ii) the foregoing Assignment of Tax Increment Revenue Note; and (iii) the assignment by Assignor to Assignee of all right, title and interest of Assignor in and to the TIF Note. APPLE VALLEY ECONOMIC DEVELOPMENT AUTHORITY, MINNESOTA By: Its: President By: Its: Secretary STATE OF MINNESOTA ) ) ss. COUNTY OF DAKOTA ) The foregoing instrument was acknowledged before me this day of ,20 ,by and the President and Secretary, respectively, of the Apple Valley Economic Development Authority, Minnesota. Notary Public V w�"` Ws 44e,sx.W r w � 152 N ,-SiT W 1'S3RDST